The Audit Committee (the Committee) was established on 27 June 1994 to act as a Committee of the Board of Directors.
MEMBERS AND MEETINGS
A total of five meetings were held during the year. Details of the composition of the Committee and the attendance by each member at the Committee meetings are set out below:
Name of Director Status of
Directorship Independent Attendance of Meetings Dato’ (Dr.) Megat Abdul
Rahman Megat Ahmad Non-executive Director Chairman of the
Committee
Yes 5/5
Lt. Gen. Dato’ Mohd Yusof
Din (R) Non-executive
Director Yes 5/5
Datuk Azzat Kamaludin Non-executive
Director No 4/5
The Deputy Chairman/Group Managing Director, the Group Chief Financial Officer, General Manager, Group Internal Audit and other members of senior management attended these meetings. The Group’s external auditors were invited to attend two of these meetings. The meetings were appropriately structured through the use of agendas, which were distributed to members with sufficient notification.
The Committee is authorised by the Board to investigate any activity within its terms of reference. It is authorised to seek any information it requires from any employee and all employees are directed to co-operate with any request made by the Committee. The Committee is authorised by the Board to obtain such outside legal or other independent professional advice and to secure the attendance of such outsiders with relevant experience and expertise as it may consider necessary. The Committee is able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other Directors and management, whenever deemed necessary.
RESpoNSIBIlITIES AND DuTIES The Committee shall undertake the following responsibilities and duties:
1. To review with the external auditors, the audit plan, the scope of audit and their audit report.
2. To review the evaluation of the system of internal control with the internal and external auditors.
3. To review the adequacy of the scope, functions, competency and resources of the internal audit functions and that it has the necessary authority to carry out its work.
4. To review the internal audit plan and review the results of the internal audit plan or investigation undertaken and whether or not appropriate action is taken on the recommendations of the internal audit function.
5. To review the quarterly results and the year end financial statements of the Group prior to the approval by the Board of Directors, focusing particularly on:
• changes in or implementation of major accounting policies;
• significant and unusual events;
and
• compliance with accounting standards and other regulatory requirements.
6. To review related party transactions entered into by the Company and the Group to ensure that they are in the best interest of the Group; fair, reasonable and on normal commercial terms; and not detrimental to minority shareholders.
7. To review the procedures of recurrent related party transactions undertaken by the Company and the Group.
8. To review with the external auditors with regards to problems and reservations arising from their interim and final audits.
9. To assess the performance of the external auditors and make recommendations to the Board of Directors on their appointment and removal.
10. To recommend the nomination of a person or persons as external auditors.
11. To review any letter of resignation from the external auditors and any questions of resignation or dismissal.
12. To monitor the Group’s compliance to the Bursa Malaysia Listing R e q u i r e m e n t s ( L R ) a n d t h e Malaysian Code of Corporate Governance from assurances by the Company Secretary and the results of review by the external and internal audits.
13. To report to Bursa Malaysia, any breaches of the LR which have not been satisfactorily resolved.
Audit Committee Report
14. To undertake such other functions as may be agreed to by the Committee and the Board of Directors.
ACTIVITIES DuRING THE FINANCIAl YEAR
During the year, the Committee carried out its duties as set out in its terms of reference. The main activities undertaken by the Committee were as follows:
• Reviewed the internal and external auditors’ scope of work and annual audit plans for the Group.
• Reviewed management letters and the audit report of the external auditors.
• Reviewed the quarterly and annual reports of the Group to ensure compliance with the LR, applicable approved accounting standards and other statutory and regulatory requirements prior to recommending f o r a p p r o v a l b y t h e B o a r d of Directors.
• Review of the Audit Committee Report, Statement on Corporate Governance and Statement on Internal Control and recommend to the Board for approval prior to their inclusion in the Company’s annual report.
• R e v i e w e d t h e r e s o u r c e requirements of the Group Internal Audit function.
• Approved the framework for related party transactions and recurrent related party transactions for adoption by the Group.
• R e v i e w e d t h e r e l a t e d p a r t y t r a n s a c t i o n s e n t e r e d b y t h e Company and the Group as well as the disclosure of and the procedures relating to related party transactions.
• Reviewed internal audit reports and to monitor/follow-up on remedial action. Where required, members of the Committee would carry out ground visits to verify significant issues highlighted in the Internal Audit Reports.
• Met with the external auditors twice during the year in the absence of management.
INTERNAl AuDIT FuNCTIoN
The Group has an in-house Group Internal A u d i t f u n c t i o n w h o s e p r i n c i p a l responsibility is to evaluate and improve the effectiveness of risk management, control and governance processes. This is accomplished through a systematic and disciplined approach of regular r e v i e w s a n d a p p r a i s a l s o f t h e management, control and governance processes based on the review plan that is approved by the Committee annually.
The Group Internal Audit function adopts a risk-based methodology in planning and conducting audits by focusing on key risks areas.
The terms of reference of the Group Internal Audit function are clearly spelt out in the Group Internal Audit Charter approved by the Committee on 18 November 2009.
The Group Internal Audit function had operated and performed in accordance to the principles of the Charter. The Group Internal Audit function reports directly to the Committee, and is independent of the activities it audits.
During the financial year, the Group I n t e r n a l A u d i t f u n c t i o n h a d undertaken the following activities:
• Prepared the annual audit plan for approval by the Committee.
• Performed risk based audit based on the annual audit plan, including follow-up of matters from previous internal audit reports.
• Issued internal audit reports to the management on risk management, control and governance issues identified from the risk based audits together with recommendations for improvements in these processes.
• Undertook investigations and special reviews of matters arising from the audits and/or requested by the management a n d / o r C o m m i t t e e a n d issued reports accordingly to the management.
• R e p o r t e d o n a q u a r t e r l y basis to the Management Committee on significant risk management, control and governance issues from the internal audit reports issued, the results of investigations and special reviews undertaken and the results of follow-up of matters reported.
• Reported on a quarterly basis t o t h e C o m m i t t e e t h e achievement of the audit plan and status of resources of the Group Internal Audit function.
• Conducted follow-up of the r e c o m m e n d a t i o n s b y t h e external auditors in their management letter.
• Liaised with the external auditors to maximise the use of resources and for effective coverage of the audit risks.
• Reviewed the procedures r e l a t i n g t o r e l a t e d p a r t y transactions.
The total cost incurred for the Group Internal Audit function in respect of the financial year ended 31 December 2010 amounted to RM3.6 million (2009: RM2.4 million).